With the exception of the kiwi which lost more than 1% today in the wake of much more dovish than expected RBNZ meeting, the rest of the currency market was generally subdued with majors stuck in narrow rangebound channels for most of Asian and early London trade.

The kiwi was the biggest mover of the night losing more than 100 pips from yesterday’s New York close when the RBNZ suggested that the next move in rates for the central bank may be down. At very least the RBNZ forecast that any possible tightening will not come until 2020, forcing the market to reprice the New Zealand yield curve and push the currency lower.

In its statement, the RBNZ noted, “Risks remain to our central forecast. The recent moderation in growth could last longer. Low business confidence can affect employment and investment decisions. Conversely, there is a chance that inflation could increase faster if cost pressures can pass through into higher prices and impact inflation expectations. We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment, and maintaining low and stable inflation.”

It appears that the central bank’s primary concern is not any particular weakness in economic indicators, but rather the decline in business confidence, which no doubt is the result of a burgeoning trade war between US and China. Therefore, the kiwi will continue to serve as a referendum on trade tensions in the global economy. If those tensions begin to ease the pair could easily pop back towards the .7000 level as investor sentiment improves. For now, however, the damage has been done to the kiwi longs and the pair could probe the long-term support at .6500 before finding more sound footing.

Elsewhere the action was quiet, but better performance from Chinese equities helped fuel a rally in yen pairs with USDJPY retaking the 111.00 figure in early London trade. The pair looks ready to pop on any support from US corps and if today’s PPI data comes in line or hotter it could fuel another move towards the 111.50 level as the day proceeds.